The Meaning of Monday's 90/90 Down Day

The S&P 500 Index (SPX) had its first 90/90 down day of 2015 on Monday

by Karee Venema

Published on Jul 1, 2015 at 10:07 AM

Heading into this week's trading, it had been 132 days since the last 90/90 down day signal on the Desmond volume/price indicator -- with Monday's flash marking the first one of 2015. In other words, the S&P 500 Index (SPX) saw panic selling in which downside volume equaled 90% or more of the total upside volume plus downside volume, and the number of points lost equaled 90% or more of the total points gained and lost.

150701spx1

So, what could this mean for the SPX going forward? Schaeffer's Quantitative Analyst Chris Prybal ran the numbers, and it appears a 90/90 down day signal may be a bullish indicator. Specifically, in the 68 other times this signal has occurred since 2000, the S&P 500 Index has averaged a five-day gain of 1%, and is positive 62% of the time. Going out 63 days, this return widens to 5.9%, with the benchmark positive 79% of the time.

Compare this to the SPX anytime average five-day gain of 0.1%, with a 55% chance of a positive return. While this average improves over the 63-day period, it still only returns 1%, and is positive just 62% of the time.

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